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Advantage Lemon Tree as Optus and Sarovar Hotels part ways

The realtor's two hotels in Gurgaon and Bhiwadi now under Lemon Tree's fold.

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Patu Keswani promoted Lemon Tree Hotels is set to hoist its flag on two hotels owned by Gurgaon-based realtor Optus Group that were being managed by Sarovar Hotels until Wednesday. Industry sources told DNA Money that the management of Lemon Tree Hotels has struck a deal with Optus Group promoters to take over the two hotels on a long-term lease. DNA money had first reported this development on September 13, 2016.

Accordingly, the Delhi-based hotel chain backed by Dutch pension fund APG and global private equity major Warburg Pincus, Lemon Tree will soon rebrand the Optus' hotels in Gurgaon and Bhiwadi while also take over their management and operations.

When contacted Vijay Girdhar, chairman and managing director, Optus Group, denied the development. Lemon Tree Hotels did not offer a comment on the transaction. 

However, highly placed industry sources having knowledge of this deal said that Lemon Tree Hotels has been successful in cracking the deal with Optus and will soon add the two hotels to its portfolio.

“The approach earlier was to take a majority stake in the two hotels owned by Optus. The plan was dropped later as the capital value arrived at was too high and in excess of Rs 200 crore. The Lemon Tree management has instead taken over the hotels on an annual rental basis for the next 25 years. Accordingly, the P&L of both the hotels now belong to Lemon Tree,” sources familiar with the details said.

As a result, the 80-room Optus Sarovar Premiere hotel in Gurgaon (operational since 2009-10) and the newly developed 130-room Optus Hometel at Bhiwadi (operational since a little over two years now) will get rebranded in a week from now. Lemon Tree operates three brands viz. Lemon Tree Premier (upscale), Lemon Tree Hotels (midscale) and Red Fox Hotels (economy). The hotel chain currently owns and operates 33 hotels with over 3,500 Rooms in 21 cities.

Sarovar, which was earlier operating the hotels, has relinquished the management rights effective October 12, 2016. In fact, the company has issued an internal communication saying, Sarovar has given up management of the two hotels. The company also said that department heads should not devote time towards management and operations on the two hotels.

As the two hotels were under a long-term management contract with Sarovar Hotels, the promoters of Optus Group have also had to compensate the Sarovar management for the breach of contract before the end of its tenure. Optus is understood to have paid a little over Rs 2 crore for this settlement with Sarovar. An email sent to Sarovar Hotels' promoters Anil Madhok and Ajay K Bakaya remained unanswered at the time of going to print.

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